Alternative Lending for Small Business Owners
Raising money to fund and operate small businesses is always hard. Most entrepreneurs start by looking at conventional lending routes — seeking out bank and credit union loans, exploring SBA loans, and finding other methods of lending. These are a great place to begin and may be important to your funding needs.
However, such methods may also be insufficient, or inaccessible. In such cases, it can be useful to consider methods of alternative lending. Alternative lending, broadly speaking, refers to less standard methods of borrowing money. But that doesn’t mean they aren’t safe or reliable.
Read on to learn about some alternative methods of financing a small business.
Crowdfunding
Crowdfunding is a popular and potentially reliable way to finance a small business operation. Crowdfunding generally works by soliciting a large number of generally small donations from a wide pool of investors, or more substantial investments from a couple of larger investors (like venture capitalists).
Crowdfunding has its virtues: if your business already has some social profile, you may be able to bring in a fair amount of cash fairly easily. However, in some cases it won’t actually be enough to start a business. It will also generally necessitate some trade-off for investment. For instance, in some cases, you may have to give up some equity stake in your business.
Asset-Based Lending
Asset-based loans are another interesting method of alternative lending. An asset-based loan is lent to you based on the value of some asset that you put up as collateral — often property, a vehicle, equipment, inventory, or something else. It can offer a potentially substantial sum in short order. On the other hand, it’s unlikely to be enough to cover all of your needs.
Private Loans
It’s also useful to think about private loans. This encompasses several options that are lent privately — or in other words, not by a financial institution. Private loans also have virtues: because they are negotiated personally, there may be some flexibility when determining rates and loan terms. On the other hand, having a personal relationship with your lender can sometimes be troublesome; besides, to secure a private loan, you have to know an individual or entity with substantial funds available to offer such a loan.
While starting a business takes money, the good news is that there are many options — both standard and non-standard — for raising capital. The tips above may offer some alternative ways to get started.
